Early MTD sign-ups could result in penalties

Businesses that signed up to Making Tax Digital (MTD) before they were ready to meet the requirements could risk incurring penalties, the Association of Taxation Technicians (ATT) has warned.

MTD for VAT came into force on 1 April 2019, requiring VAT-registered businesses with a turnover above £85,000 to keep digital records and to file VAT returns using compatible software.

The rules apply to VAT return periods that begin on or after the start date, meaning the first mandatory MTD return deadline for most businesses is either 7 August 2019, 7 September 2019, or 7 October 2019.

Once a business has signed up to MTD, however, it must submit all its VAT returns using MTD-compatible software, however its VAT return periods fall.

The ATT said those that have not prepared to submit MTD-compatible returns could encounter problems meeting the submission deadline, potentially putting them at risk of late-filing penalties.

Jon Stride, co-chair of the ATT's technical steering group, said:

"HMRC have been very clear that they want businesses to continue to pay their VAT on time under MTD, even where they have problems filing or keeping digital records.

"Businesses which do not pay their VAT, or pay late, remain exposed to penalties in the normal way.

"We strongly recommend that those businesses who now find that they are struggling to file their returns under MTD should prioritise paying their VAT on time."